Financial stability is crucial for a country’s economic growth but challenged through the high level of non-performing loans, the low profitability of the financial sector, and the continuously high level of dollarization. The capacities of the NBKR for effective and efficient financial sector supervision are not yet fully in place and require further strengthening to be risk-based and to enforce regulations.

The project contributes to financial stability by strengthening the capacities of NBKR as a financial sector regulator and of the Deposit Protection Agency as a key financial safety net participant. The goal is to strengthen supervision for the banking sector and the non-banking sector.

Regulatory and supervisory framework for banks in line with international good practice established- and capacity of NBKR to conduct risk based supervision and regulatory oversight of banks enhanced.

Regulatory and supervisory framework for non-banks moved towards the international standard and aligned to the supervisory approach for banks- and capacity of NBKR to conduct risk based supervision and regulatory oversight of micro finance organizations and credit unions enhanced.

Safety net participants (i.e. NBKR and DPA) are ready to deal with financial crisis.

Deposit Protection Agency enabled to pay out depositors of a liquidated mid-size bank.

NBKR is enabled to conduct market conduct supervision according to international good practice.

Principaux résultats attendus:  

Have the risk based supervisory manual for banks and non-banks approved.

Prudential regulation on capital, liquidity, single borrowers limit and related party lending approved.

Review regulations related to crisis preparedness (e.g. temporary administrator) and recommend revisions.

Develop operational supervisory processes how to restructure and resolve weak banks.

Assess governance structure, investment policy and procedures, and pay-out procedures of the Deposit Protection Agency, and recommend revisions.

Develop a market conduct supervisory framework.

Principaux résultats antérieurs:  

Risk based supervision manual developed.

Risk based supervision team appointed at the NBKR’s supervision department.

Risk based supervision piloted with five of 25 banks.

Stress testing models provided under the project independently and systematically used by the NBKR.

Multi-agency crisis simulation exercise undertaken and lessons learnt being assessed for incorporation into a new and strengthened Prompt Remedial Action Framework (PRAF).

New deposit protection law, incorporating World Bank comments, passed.

Diagnostic of the regulatory/supervisory environment for Microfinance Organizations and Credit Unions has been undertaken.

Consumer Protection and Financial Literacy surveys conducted.

Regulations on market conduct supervision, including supporting introduction of key fact statements for loans, developed.

Audit of Debt Restructuring Agency finished.

Phase 2 01.12.2017 - 31.10.2023   (Active)